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Yahoo's first quarter highlighted by Alibaba income, modest ad gains

SAN FRANCISCO--Yahoo is still prospering from its lucrative investments in Asia while the Internet company's listless advertising sales are picking up, if ever so slightly, under CEO Marissa Mayer.

The positive signs in the Yahoo's first-quarter report overshadowed a 20-percent decline in the company's earnings during the opening three months of the year.

The results released Tuesday highlight the contrasting performances of Yahoo's investment portfolio and the company's main business of running ad-supported online services.

Yahoo Inc. is making most of its money from its holdings in two Asian Internet companies — China's Alibaba Group and Yahoo Japan.

Meanwhile, the Sunnyvale, California company has been struggling to sell more ads, even as marketers divert more of their budgets to the Internet. Most of those digital dollars, though, have been flowing toward Google Inc., the Internet's search leader, and Facebook Inc., the online social networking leader.

Yahoo's share of the worldwide market for digital advertising is expected to shrink to 2.5 percent this year, down from 3.4 percent in 2012, while Google's share climbs to 33 percent and Facebook's share rises to 8 percent, according to the research firm eMarketer.

A 24-percent stake in Alibaba has turned into Yahoo's crown jewel as the Chinese company prepares to go public on the New York Stock Exchange later this year. Since selling Yahoo its stake for US$1 billion in 2005, Alibaba has built a massive e-commerce network that caters to businesses and consumers in the world's most populous country.

Yahoo's report provided that latest tantalizing peek at how rapidly Alibaba has been growing. The numbers covered Alibaba's fourth quarter from last year because there is a three-month lag before Yahoo books its portion of Alibaba's income.

Alibaba's fourth-quarter earnings more than doubled from the previous year to US$1.35 billion while its revenue surged 66 percent to US$3.06 billion.

The stellar performance reinforced hopes that Alibaba's market value could range somewhere between US$150 billion and US$200 billion when it goes public. By comparison, Facebook started off with a market value of US$104 billion in its highly anticipated Wall Street debut in 2012.

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